Private or Public Equity? The Evolving Entrepreneurial Finance Landscape

Michael Ewens and Joan Farre-Mensa ()
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Joan Farre-Mensa: Department of Finance, University of Illinois at Chicago, Chicago, Illinois, USA

Annual Review of Financial Economics, 2022, vol. 14, issue 1, 271-293

Abstract: The US entrepreneurial finance market has changed dramatically over the last two decades. Entrepreneurs who raise their first round of venture capital retain 30% more equity in their firm and are more likely to control their board of directors. Late-stage start-ups are raising larger amounts of capital in the private markets from a growing pool of traditional and new investors. These private market changes have coincided with a sharp decline in the number of firms going public—and when firms do go public, they are older and have raised more private capital. To understand these facts, we provide a systematic description of the differences between private and public firms. Next, we review several regulatory, technological, and competitive changes affecting both start-ups and investors that help explain how the trade-offs between going public and staying private have changed. We conclude by listing several open research questions.

Keywords: entrepreneurial finance; financial intermediation; initial public offerings; IPOs; private equity; private firm; venture capital (search for similar items in EconPapers)
JEL-codes: G23 G24 G28 G34 G38 (search for similar items in EconPapers)
Date: 2022
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Working Paper: Private or Public Equity? The Evolving Entrepreneurial Finance Landscape (2021)
Working Paper: Private or Public Equity? The Evolving Entrepreneurial Finance Landscape (2021)
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DOI: 10.1146/annurev-financial-101821-121115

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